Output at U.S. factories rose in May by more than forecast, signaling further improvement in the sector despite supply shortages, hiring difficulties and elevated materials prices.
The 0.9% increase followed a revised 0.1% decrease in April, Federal Reserve data showed Tuesday. Total industrial production, which also includes mining and utility output, climbed 0.8% in May after a revised 0.1% gain a month earlier.
The gain in factory output included a strong rebound in motor vehicle production and strength in machinery and chemicals. The median estimate in a Bloomberg survey of economists called for a 0.8% monthly increase in factory production and a 0.7% gain in industrial production.
Steady business investment, resilient consumer spending and a more recent pickup in export demand are all helping to fuel orders growth. When paired with a backdrop of lean inventories, factory output is poised to pick up steam in the months ahead. Even so, headwinds remain.
Producers continue to grapple with shipping delays, unfilled job openings and supply shortages like semiconductors. Manufacturers are also contending with higher input prices. The Labor Department said earlier on Tuesday that its producer price index increased 0.8% in May after a 0.6% gain in the prior month.
Another report out Tuesday showed business activity among manufacturers in New York state expanded at a slower pace in June as growth in new orders and shipments eased. Firms remain very optimistic about the future, with a measure of expected employment advancing to a record high.
Growing Capacity
Total industrial production is nearing pre-pandemic levels -- down less than 1.5% from February 2020 -- but restrained capacity continues to limit faster output growth. Manufacturing capacity utilization, a measure of plant use, climbed to 75.6%, while total industrial capacity increased to 75.2%.
Production of motor vehicles rose 6.7% last month compared with 5.7% decrease a month earlier. U.S. automakers have been hit hard by a global chip shortage, resulting in plant shutdowns and lower output in some cases. Excluding autos and parts, manufacturing rose 0.5% after a 0.3% advance.
The Fed’s report paints a similar picture as the Institute for Supply Management’s index of factory activity out earlier this month. The gauge picked up in May amid stronger orders growth, though purchasing managers noted ongoing supply shortages and labor constraints in their comments.
Digging Deeper
- Utility output rose 0.2% in May as temperatures became more seasonal
- Mining output increased 1.2%
- Oil and gas well drilling jumped 4.3% after a 2.8% gain
— With assistance by Kristy Scheuble
"Factory" - Google News
June 15, 2021 at 08:18PM
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Factory Output in U.S. Increased in May by More Than Forecast - Bloomberg
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